There’s no painless way to end the Medicaid expansion

Editor’s note: The piece was written by Dee Mahan, Director of Medicaid Initiatives at Families USA, and was originally published on Families USA’s blog on June 1.

As the Senate develops its version of the House’s American Health Care Act (AHCA) it should bear this in mind: There is no “glide path” to ending the Medicaid expansion. Ending federal funding for the Medicaid expansion, even with a supposed “phase out,” means millions across the 31 expansion states (plus D.C.) will start losing coverage. Fast.

Likewise, states will start feeling the fiscal pain. Fast. This can’t be changed even with radical restructuring of the AHCA.

The AHCA ends the Medicaid expansion by essentially freezing enrollment of people in the program and cutting funding.

Starting in 2020, the funding the federal government gives to states for people in the Medicaid expansion (known as “enhanced federal match”) will apply only to people enrolled in 2019 and only for as long as they are continuously enrolled in the expansion.

Here’s how it would work: Imagine a seasonal worker covered through the Medicaid expansion, with the state getting a 90 percent federal match. Say that person gets an uptick in jobs in the summer and her income goes up and she is no longer eligible for Medicaid so drops out of the program.

In the winter, when jobs are fewer, her income goes down and she enrolls in Medicaid again. The state would only get the standard match rate, not the higher rate for people in the expansion — potentially 40 percent less in federal help. And that is only if the state continued to offer coverage to adults at all.

Lower-income adults — that’s who’s enrolled in the Medicaid expansion — have frequent income fluctuations. There are lots of reasons for this — many low-wage jobs are seasonal or temporary, low-wage workers’ jobs are less secure. (And let’s remember, most people covered by the Medicaid expansion are working.)

Since Medicaid expansion eligibility is tied to income, people in the program similarly move in and out of coverage. The problem with repeal proposals like the AHCA is that, when people try to get back into the program, states will get a lot less money. Some experts predict that, because of churn, there will be almost no enhanced match left “within a year or so.”

In some states the expansion would end even faster

There are at least seven states where their residents will feel the pain of lost coverage, and their economies will take a hit, even faster. These states — Arkansas, Illinois, Indiana, Michigan, New Hampshire, New Mexico and Washington — have passed legislation requiring expansion be terminated, usually within months, of the enhanced matched being reduced.

In those states, the expansion would end immediately when the enhanced match ends for new enrollees. Other states are likely to pull out of the expansion altogether in 2020, or before, in anticipation of budget shortfalls.

States are unlikely to offer Medicaid coverage to adults once the Medicaid expansion ends

The odds are that most of the 31 states currently covering adults through the Medicaid expansion won’t be offering coverage for adults who don’t qualify for the added federal match. Or if they do, it will be skimpy at best.

That’s because states will have to put in a lot more state money to pay for adults’ coverage (either raising taxes or cutting funding elsewhere). Historically, most states haven’t offered adults health coverage even though they had the option.

States’ failure to offer Medicaid coverage to adults at the standard match level was precisely why the ACA included a higher match rate for that population. Without the added match, in most of the 31 expansion states (plus D.C.), for most adults, Medicaid coverage will vanish.

Most of the 15 million people who have gained coverage through the Medicaid expansion will find themselves uninsured again. It also means that for state residents who see their circumstances change and income drop sometime in the future — a layoff, an accident, an injury — Medicaid won’t be a safety net for them.

There’s no way to blunt the fiscal hit to states

Just as churn is going to mean a fast unraveling of the Medicaid expansion and a fast uptick in the number of uninsured, it will also mean a fast loss of federal funding. That has economic consequences that can ripple throughout state economies and extend to non-expansion states.

Because expansion funds would dry up rapidly under the AHCA, states would likewise feel the economic effects rapidly. While states that expanded Medicaid would be hit hardest, because commerce spans across states, all states would be hurt to some extent.

The lack of a “glide path” ending to the expansion isn’t just a function of the AHCA. No matter how the Senate might try to restructure it, ending or “phasing down” the federal funding will mean that across 31 states and the District of Columbia, millions of adults 18 to 64 who have health insurance now will become uninsured.

Millions who face tough economic times in the future and need Medicaid’s safety net will become uninsured. That’s the exact opposite of the election promises made about covering everyone. And the residents of those 31 states will remember that.